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Global Business and Management Research: An International Journal
Vol. 7, No. 1 (2015)
74
E-Banking Service Quality and
Customer Loyalty: Changing Dynamics
of Public, Private and Foreign Bank
Consumers in India
Navneet Kaur and Ravi Kiran School of Behavioral Sciences and Business Studies, Thapar University,
Patiala, Punjab, India
*Corresponding author email: [email protected]
Abstract
Purpose: The purpose of this research paper is to study how the e-banking
consumers’ perceive the e- banking services of public, private and foreign sector banks operating in the Indian banking sector and also making a deeper
introspection of service quality in all three types of banks to understand whether
there is a significant difference in service quality on the basis of nature of banks. Design/methodology/approach: The study uses self-structured questionnaire
duly validated and tested for reliability in this research. Factor analysis,
Regression analysis and ANOVA have been used in the paper. ANOVA has
been used to find out whether there is a significant difference in e-banking service quality in public, private and foreign banks. It makes an empirical
analysis of factors influencing e-banking service quality by using Factor
Analysis and then a relation between service quality and customer loyalty has been found by using Regression analysis.
Findings: Findings of the research paper are that improvement in service quality
would induce higher customer loyalty. The initial part of paper measures the e-
banking services through Debit, Credit, Internet, Telephone, Mobile, Depository, Investment and Multicity facilities in three types of banks. The results of
ANOVA highlight that there is a significant difference in these facilities of
public, private and foreign banks. Factor analysis results help to reduce 12 features of service quality into four factors. These four factors explain 84.014 per
cent of variation. These four factors are: Website interface, Security,
Convenience and Access. Originality: The present research focuses on e-banking service quality and
customer loyalty covering changing dynamics of public, private and foreign
banks’ consumers in India, which has not been covered in earlier studies. The
service quality features are for e- banking only and are different from the earlier studies on banking in general. On the basis of regression, the study identifies the
factors to be either improved or enhanced and the banks can accordingly focus
on the areas they want to improve/ enhance for increasing customer loyalty.
Keywords: Service quality, E-banking, Customer loyalty, India.
Paper Type: Research Paper
Global Business &
Management Research:
An International Journal
Vol. 7, No. 1, 2015
pp. 74-92
Global Business and Management Research: An International Journal
Vol. 7, No. 1 (2015)
75
Introduction
In this era of stiff competition, public, private and foreign sector banks in India have realized
the importance of achieving high levels of customer satisfaction by providing service quality
of world class. Banks operating in these three sectors are consequently putting a lot of
pressure due to increase in competition. Various strategies are formulated to retain the
customers and the key of it is to increase the service quality level. Service quality is
particularly essential in the banking services context because it provides high level of
customer satisfaction and hence it becomes a key to competitive advantage as well as it leads
to customer retention. In addition, service quality has a significant impact on a bank’s success
and performance (Mouawad and Kleiner 1996). Nowadays, service quality has received added
attention because of its relationship with costs, financial performance, customer satisfaction
and customer retention. Due to the dawn of e-banking, quality of service has been enhanced
as compared to conventional banking services. Internet banking, Mobile banking, automated
teller machine, electronic fund transfer has totally altered the way of providing services by the
banks. As customers are now technology savvy, therefore, it becomes indispensable to
consider the use of technology to react to their continuous needs. The penetration of ATMs in
India increased in 2012-13 with the total number of ATMs crossing 1,00,000, clocking a
double digit growth during the year. This growth was driven primarily by private sector banks
with their share in total ATMs picking up rapidly to about 38 per cent. So far, debit cards have
been a more popular mode of electronic money than credit cards in India (RBI reports, 2013).
While public sector banks have been frontrunners in issuing debit cards, new private sector
banks continue to lead in the number of credit cards issued. As the service quality improves,
the probability of customer loyalty increases. Bank automation and electronic banking is
invading at a rapid pace and private sector and foreign sector banks have an advantage of
adopting it at a faster pace than the public sector banks and it also has to capture the pace.
E-banking is an improvement over traditional banking system because it has reduced the cost
of transaction processing and thereby improving the payment efficiency and also improving
the banker-customer relationship. The relationship between e-banking and service quality can
be studied with the level of customer satisfaction and loyalty. E-banking plays a pivotal role in
providing satisfaction to the customers. Banks should discover innovative ways of making
electronic services more accessible and by allowing the customer to verify the accuracy of the
e-banking transactions.
Most importantly, profitable e-banking requires a strong focus not only on the acquisition of
new customers but also on the retention of existing customers, since the acquisition costs in
online banking exceed that of traditional off line business by 20-40 % (Reibstein, 2002;
Reichheld & Schefter, 2000). Consequently, establishing long-term customer relationships is a
prerequisite for generating positive customer value on the internet. During the last few years,
these findings have led to the development of simple banking web sites into wide-ranging e-
banking portals offering a great variety of services. In order to enhance customer loyalty,
portals are required to put a strong emphasis on their customers’ quality demands, which are
steadily increasing over time (Jun & Cai, 2001). Most importantly, satsfaction has been
recognized as a key path to long-term profitability. These findings hold especially true for the
financial services, where reducing the defection rate by 5 per cent can boost profits up to 80
per cent (Reichheld & Sasser, 1990).
Global Business and Management Research: An International Journal
Vol. 7, No. 1 (2015)
76
The study for the Indian banking sector for the period 2005-06 to 2009-10 too suggested
efficiency gains resulting from technological innovations and investment in IT (Rajput and
Gupta, 2011). Globally, there has been a rapid advancement in Information and
Communication Technology (ICT) which has reflected in banks’ business strategies, customer
services and organisational structures among others. Innovative adoption in the form of
internet banking, ATMs and mobile applications have created a profound impact on the
delivery channels of banking services. Also, a number of innovative developments in retail
payments have emerged, which affect the retail payment market by influencing users in their
choice of payment instruments and by significantly reshaping the payment processes.
Notwithstanding the growth of various electronic modes of payment in India, it still has a long
way to go in terms of achieving the high levels of penetration of such modes across the world,
particularly in high income countries. The usage of electronic modes of payments/ transfers
can help in reducing the costs of operation for banks, the benefit of which can be transferred
to customers.
This study aims to explore the difference in the e-banking service quality features of public,
private and foreign sector banks. It also covers the relation between customer loyalty and
service quality factors in banking sector to help banks to increase customers’ satisfaction.
Literature Review
A customer entered in a bank must get maximum satisfaction from the quality of e-banking
services offered by them. Service quality has been found as one of the important factor in
making a difference in products and services (Balachandher, et.al 2001). Maximizing
customer satisfaction through quality customer service has been described as 'the ultimate
weapon' by Davidow and Uttal (1989). According to Yang and Fang (2004) Service quality
is a significant instrument to measure customer satisfaction. There is a close relationship
between customer satisfaction and service quality. Customer satisfaction can be given by
providing quality of products and services to customers. For accessing customer satisfaction,
SERVQUAL model is used to know the different services provided by banks and customer
perceptions about the services. This tool is used to overcome problems with related to
customer satisfaction and quality of services offered to customers. As now most banks are
offering e-services there is a need to understand difference in services from the point of
access, availability and even adaptability. This needs to be identified and empirically
verified.
Wong and Sohal (2003) discussed about customer satisfaction as often recognized as the
future expectations of banks in terms of its profitability and market share, a satisfied
customer always shares his or her experiences to others through word of mouth advertising
extensively to increase more new customers to bank. This is possible only when the banks
give quality services with ease. On the other hand a dissatisfied customer can lead to
extensive loss by means of losing present and prospective customers. It is not only the
customer satisfaction, the social relationships with customers is also equally important.
Interacting with customers and their family increases the opportunity for bank, it is seen in
foreign banks that passing the wishes on birthdays and marriage anniversaries is a news
strategy for banks to keep in touch with customers. In a competitive market place,
understanding customer’s needs is very valuable. Satisfaction is the main source of attracting
customers (Patterson et al., 1997). Customer loyalty has become a great challenge for
Global Business and Management Research: An International Journal
Vol. 7, No. 1 (2015)
77
companies in the current era (Khalifa & Liu, 2003). In banking sector, it is very important to
understand the factors leading to satisfaction, which will evidently lead to loyalty (Vanriel et
al., 2001). The competition is increasing day-by-day regarding services in banking sector. It
has been observed that Information Technology is replacing the human labor at a rapid rate
(Jun & Cai, 2001). It has been proved that organizations need to give more consideration
towards customer satisfaction and loyalty (Parasuraman & Grewal, 2000). Mols (2000)
argued that the home-based Internet banking might lead to strong relationships with
customers because customer expectations have a tendency to change over time. In the same
manner, service quality is another important issue while gaining customer satisfaction and
retention. Maintaining service quality is extremely necessary in current and highly
competitive banking sector (Mefford, 1993). For this, bankers need to identify the attributes
affecting customer loyalty. Literature gives very limited information related to these
attributes (Jun & Cai, 2001). More research should be conducted to know about the attributes
leading to customer satisfaction and customer loyalty (Parasurman et al., 1991). The measure
of customer loyalty used in the study comprises of nine items:
i. Satisfaction regarding e-banking
ii. Accuracy of reporting transactions
iii. Inconvenience in changing bank
iv. Good relationship with staff
v. Providing updated information regarding rewards and schemes
vi. Ability to meet consumer's changing needs
vii. Comfort of electronic banking channels to carryout banking transactions than
physically going to branch
viii. E-Banking has reduced the 'Gap' between the bank and the client
ix. Preference to choose the Internet banking service of prime bank
Service quality has a great impact on customer loyalty and service quality is considered as a
distinct feature which bears great importance for customer satisfaction and retention (Oliver,
1980). Service quality is determined by the comparison made by the customers between their
expectations and experiences (Gurau, 2002; Parasuraman et al., 1988). Service quality is also
linked with customer satisfaction. While some researchers are in the view that customer,
satisfaction rather than service quality exerts stronger influences on buying intentions of the
customers (Cronin and Taylor, 1992). Some other researchers also provided the strong
empirical evidences supporting the fact that service quality increases the customer intentions
to remain with any company. For example, Buzzell and Gale (1987) found out that service
quality results in increased market share and repeated sales that ultimately leads to customer
loyalty. Zeithaml et al. (1996) also concluded in their research that when organizations
improve the quality of their services, customers’ unfavorable intentions are decreased while
favorable behavioral intentions are increased. Traditional service systems are still demanded
by the customers along with the internet-based banking (Yang and Fang, 2004).Customer
satisfaction is an important driver for better organizational performance especially in the
banking sector due to increased competition. Several studies measured the relationship
between customer loyalty and performance of the firm (Anderson et al., 1994; Al-Hawari and
Warid, 2006). However, there is a severe shortage of literature that specifically measured the
performance of banks with reference to service quality and customer satisfaction. It is found
Global Business and Management Research: An International Journal
Vol. 7, No. 1 (2015)
78
that there is a significant relationship between service quality and financial performance
(Duncan and Elliot, 2002). So it is concluded that superior delivery of services results into
superior profitability (Kotler, 2003) and thus it may be win- win situation for banks as well
as customers.
According to Smith and Bolton (2002) customer satisfaction has a major role in retail banking,
and through this will lead to retention of customers. Thus there is a need to focus on quality of
services, timings of banks, interaction of a banker with customers. It is equally important to
provide online banking system and phone banking which works 24/7 and can communicate
with a banker easily to know about any information related their accounts. Anderson et al.
(1976) described customer satisfaction as a way of convenience and accessibility that make it
easy for him/her to do the transactions of banking. On another side it is the bank’s ability to
deliver these benefits on a regular basis to its customers will have impact on customer
satisfaction. Providing the best to customers is one strategy which banks have in their hands. It
is the responsibility of every one working bank to provide quality services.
It is found that from the survey figures done by Chaoprasert and Elsey( 2004) that it incur
most cost for acquiring a new customer than maintain the existing customer. Customer
satisfaction, customer relationship and quality services are there important aspects for banks to
retain the customer for long run, and investments on these three elements gives profitability
and market share. Quality service frequently result in more recurrent purchases and increase in
market share. Customer satisfaction leads to customer loyalty and thereby leads to profitability
and hence service quality is known as one of the basics of customer satisfaction. Hossain and
Leo (2009) discussed that now a days banks understand that if they provide greater value of
services than their competitors in the market then, customer will be loyal and consequently
and on other hand, if banks ignore about the satisfaction level of customers and concentrate
only on the profits that are getting better than its competitors banks can only earn high profits
if they are able to position themselves better than competitor within a particular market.
Accordingly, banks need to concentrate on service quality as an essential competitive strategy.
The author defined service quality as a process consisting of series of intangible activities that
takes place in one particular organization to reach its determined customer satisfaction about
organization. As the study is revolving around three categories of banks, viz., public, private
and foreign banks, it is important to understand the difference in the e-services provided by
them, accordingly the hypothesis is:
H1: There is a significant difference in the service quality features of private, public and
foreign banks.
Rusbult (1988) argued that a person’s loyalty and future relationship with a firm depends on
their past relationship with it while evaluating all the alternatives available. The competence
of a bank to handle conflict will determine customer satisfaction and customer loyalty. In
addition, Fen & Lian (2007) established both customer satisfaction and service quality as
predictors for re-patronage in restaurant industry moreover; they found customer satisfaction
as a more suitable candidate for re-toleration. However, the same variable has yet been
applied to banking industry further its presence has not been examined along other variables
leading to customer loyalty. Studies have widely highlighted the relationship between
customer satisfactions and customer loyalty (Rust & Zahorik, 1993; Fornell, 1992; Patterson
& Spreng, 1997; Taylor & Baker, 1994; Bearden & Teel, 1983) emphasized on the importance
Global Business and Management Research: An International Journal
Vol. 7, No. 1 (2015)
79
of customer satisfaction, as it is a significant predictor of customer loyalty. Likewise, Rust &
Zahorik, (1993) declared that a contended customer exhibits greater retention and expressed
significantly positive impact of customer satisfaction on customer loyalty. Particularly,
customer satisfaction and repurchase intentions are inter-related (Rust & Zahorik, 1993;
Taylor & Baker, 1994; Patterson & Spreng, 1997; Bolton, 1998; Hellier et al., 2003 and Fen &
Lian, 2007). It is very important to identify the elements of service quality in order to gain
customer satisfaction (Johnston, 1995). Angur et al. (1999) examined the applicability of
alternative service quality measure in the Retail Banking industry in India. They conducted
their research on the consumers of two major banks in India. They use SERVQUAL model to
measure the overall service quality. They found that all the dimensions are not equally
important in explaining variance in overall service quality. The result indicated that
responsiveness and reliability seem to be the most important dimensions followed by the
empathy and tangible dimensions; whereas, assurance appears to be the least important
dimension. These all may be true for physical banking, but e-banking service quality has to
focus on e-facilities, website interaction and security. Thus, though there is ample literature on
service quality, yet there is less emphasis on e-banking services. Thus, there is still many areas
especially the relation between service quality and customer loyalty, this study tries to fill
these gaps to throw more insight on these perspectives especially by drawing a sample from
public, private and foreign banks from NCR region in India.
H2: There is a positive relation between e-banking service quality factors and Customer
Loyalty.
Design and Methodology
This research study is based on random sampling and self-structured questionnaire with
twenty one items has been be used to gather data from the respondents from New Delhi,
Gurgaon and Faridabad in Haryana and Noida & Greater Noida from Uttar Pradesh. The
region covered is NCR, comprising of three states, Delhi, Uttar Pradesh and Haryana. In all
800 questionnaire were distributed, 415 were received and four hundred questionnaire
complete in all aspects have been taken for the study. The response rate has been 51.87
percent. The questionnaire has been validated by academicians and banks managers. The
suggestions given by them have been incorporated in the questionnaire.
For the purpose of conducting this study, primary data has been used. A well-structured
questionnaire has been designed so as to take responses from customers who are using e-
banking services and from prospective customers of e-banking also. The questionnaire is
based on 5 point Likert Scale. The sample size is 400. The study has been conducted in Delhi
& NCR. The reliability score of questionnaire has been presented in table I. The overall
reliability has been 0.850.
Table I: Reliability Statistics
S No Item Name No of Items Cronback Alpha
1 Service Quality 12 0.875
2 Customer loyalty 09 0.824
3 Total 21 0.850
Global Business and Management Research: An International Journal
Vol. 7, No. 1 (2015)
80
Results and Discussion
This section discusses results by initially covering the profile of respondents, switching over
to customers’ perception of e-banking service quality features and finally focusing on service
quality factors of e-banking.
Profile of Respondents
Table II: Bank category * Age Cross- tabulation
Age Total
< 30 31-44 >45
Private Sector
Banks
Count 96 38 7 141
% within Bank
category
68.1% 27.0% 5.0% 100.0%
% of Total 24.0% 9.5% 1.8% 35.2%
Public Sector Banks
Count 104 56 64 224
% within Bank
category
46.4% 25.0% 28.6% 100.0%
% of Total 26.0% 14.0% 16.0% 56.0%
Foreign Sector
Banks
Count 8 26 1 35
% within Bank
category
22.9% 74.3% 2.9% 100.0%
% of Total 2.0% 6.5% 0.2% 8.8%
Total Count 208 120 72 400
% within Bank
category
52.0% 30.0% 18.0% 100.0%
% of Total 52.0% 30.0% 18.0% 100.0%
As shown through Table II, majority of respondents are in Public Sector Banks, followed by
private sector banks. In age group of 31-44, similar trend is visible. In category greater than
45, also from a total of 72 respondents, 64 are in public sector banks.
The sample is dominated by males constituting 64 percent and females constituting 36 percent
of sample. The number of males in all types of banks is higher than that of females. 11.2 %
females belong to public sector banks, 24.0% females belong to private sector banks and
remaining 0.8% to foreign banks. Regarding males, 24.0% belong to public sector banks,
32.0% to private sector banks and 8.0% to foreign banks. High Tax payers dominate in all
Bank categories. Majority of respondents are in foreign sector banks.
Global Business and Management Research: An International Journal
Vol. 7, No. 1 (2015)
81
Customers Perception of E-Banking Service Quality features
Service quality Features in private, public and foreign Banks
Table III: Mean score of Service quality Features
Service Quality Features
Bank Category
Private Sector
Bank
Public Sector
Banks
Foreign Sector
Banks Total
Convenient operating hours 2.73 2.63 3.11 2.71
Safety of funds transfer on
net
2.42 2.52 2.97 2.52
Reasonable service charges 3.67 3.84 4.51 3.84
ATM Services 2.38 2.43 3.71 2.52
Internet banking assistance 2.81 2.36 3.57 2.62
Depository services 2.38 2.36 3.20 2.44
Credit card Services 2.99 2.93 3.51 3.00
Debit card Services 2.72 2.32 3.43 2.56
Phone banking Facility 2.67 2.11 3.43 2.42
Other IT based services 2.33 2.11 2.71 2.24
One stop banking 3.35 3.75 3.66 3.60
Innovative services 2.35 2.18 3.57 2.36
As is clearly visible from Table III that foreign sector banks maintain supremacy among all
service quality features. This means that in terms of service quality, consumers gave highest
ratings to services quality features of foreign sector banks. In terms of convenience and Safety
of funds transfer on net, public sector banks scored a little higher than private sector banks. In
case of Internet banking assistance, private sector banks scored more. In case of ATM
Services, public sector outperformed the private sector banks, but in debit and credit card
services, it was vice- versa. In case of Innovative services, Public sector banks have a long
way to go. One thing is very obvious from broad results that private and public sector banks
need to learn more from foreign sector banks.
Service Quality Features and category of Banks
Next step was to find out whether there is a significant difference in the service quality
features of Private, Public and Foreign banks. ANOVA was used to find out whether there is a
significant difference according to different categories of banks (Table IV).
Global Business and Management Research: An International Journal
Vol. 7, No. 1 (2015)
82
Table IV: ANOVA Results for Service Quality Features and category of Banks
Sum of
Squares
Df Mean Square F Sig.
Convenient operating
hours
Between Groups 7.230 2 3.615 3.236 .040*
Within Groups 443.547 397 1.117
Total 450.778 399
Safety of funds
transfer on net
Between Groups 8.585 2 4.293 4.616 .010*
Within Groups 369.212 397 .930
Total 377.798 399
Reasonable service
charges
Between Groups 20.147 2 10.074 15.852 .000***
Within Groups 252.290 397 .635
Total 272.438 399
ATM Services
Between Groups 54.719 2 27.360 36.076 .000***
Within Groups 301.078 397 .758
Total 355.798 399
Internet Banking
Between Groups 52.168 2 26.084 29.771 .000***
Within Groups 347.830 397 .876
Total 399.997 399
Depository Services
Between Groups 22.212 2 11.106 17.472 .000***
Within Groups 252.348 397 .636
Total 274.560 399
Credit card Services
Between Groups 10.428 2 5.214 15.498 .000***
Within Groups 133.572 397 .336
Total 144.000 399
Debit card Services
Between Groups 42.919 2 21.459 32.314 .000***
Within Groups 263.641 397 .664
Total 306.560 399
Phone Banking
Facility
Between Groups 66.107 2 33.053 54.828 .000***
Within Groups 239.333 397 .603
Total 305.440 399
Other IT based
Services
Between Groups 13.055 2 6.528 18.523 .000***
Within Groups 139.905 397 .352
Total 152.960 399
One stop banking
Between Groups 14.143 2 7.071 10.251 .000***
Within Groups 273.857 397 .690
Total 288.000 399
Innovative services
Between Groups 58.760 2 29.380 55.701 .000***
Within Groups 209.400 397 .527
Total 268.160 399
Hypothesis: There is a significant difference in service quality on the basis of nature of banks.
ANOVA results shown in Table III are clearly indicative of difference in service quality
features of three categories of banks. Thus this hypothesis that service quality features of
private, public and foreign sector banks are different has been accepted as p value is
Global Business and Management Research: An International Journal
Vol. 7, No. 1 (2015)
83
significant for all the features. After analysis the differences, post-hoc Turkey HSD were
performed for each feature to understand where the difference was significant. The results are
shown through Table V.
Table V: Post-hoc Tests for service quality features of Private, Public and Foreign sector
Banks
Multiple Comparisons
Tukey HSD
Dependent
Variable
(I) Bank
category
(J) Bank
Category
Mean
Difference
(I-J)
Std.
Error
Sig. 95% Confidence
Interval
Lower
Bound
Upper
Bound
Convenient
operating
hours
Private Sector
Banks (Pvt)
( Pub) .10103 .11363 .647 -.1663 .3683
(For) -.38379 .19961 .134 -.8534 .0858
Public Sector
Banks ( Pub)
(Pvt) -.10103 .11363 .647 -.3683 .1663
(For) -.48482* .19212 .032 -.9368 -.0329
Foreign Sector
Banks ( For)
(Pvt) .38379 .19961 .134 -.0858 .8534
( Pub) .48482* .19212 .032 .0329 .9368
Safety of
funds transfer
on net
Private Sector
Banks
( Pub) -.09942 .10367 .603 -.3433 .1445
(For) -.55299* .18212 .007 -.9814 -.1245
Public Sector
Banks
(Pvt) .09942 .10367 .603 -.1445 .3433
(For) -.45357* .17528 .027 -.8659 -.0412
Foreign Sector
Banks
(Pvt) .55299* .18212 .007 .1245 .9814
( Pub) .45357* .17528 .027 .0412 .8659
Reasonable
service
charges
Private Sector
Banks
( Pub) -.17262 .08570 .110 -.3742 .0290
(For) -.84762* .15055 .000 -1.2018 -.4935
Public Sector
Banks
(Pvt) .17262 .08570 .110 -.0290 .3742
(For) -.67500* .14489 .000 -1.0159 -.3341
Foreign Sector
Banks
(Pvt) .84762* .15055 .000 .4935 1.2018
( Pub) .67500* .14489 .000 .3341 1.0159
ATM Services
Private Sector
Banks
( Pub) -.05268 .09362 .840 -.2729 .1676
(For) -1.33840* .16446 .000 -1.7253 -.9515
Public Sector
Banks
(Pvt) .05268 .09362 .840 -.1676 .2729
(For) -1.28571* .15828 .000 -1.6581 -.9133
Foreign Sector
Banks
(Pvt) 1.33840* .16446 .000 .9515 1.7253
( Pub) 1.28571* .15828 .000 .9133 1.6581
Internet
Banking
Private Sector
Banks
( Pub) .45137* .10062 .000 .2146 .6881
(For) -.76292* .17677 .000 -1.1788 -.3471
Public Sector
Banks
(Pvt) -.45137* .10062 .000 -.6881 -.2146
(For) -1.21429* .17013 .000 -1.6145 -.8140
Foreign Sector
Banks
(Pvt) .76292* .17677 .000 .3471 1.1788
( Pub) 1.21429* .17013 .000 .8140 1.6145
Access to
safety
Private Sector
Banks
( Pub) .02584 .08571 .951 -.1758 .2275
(For) -.81702* .15056 .000 -1.1712 -.4628
Global Business and Management Research: An International Journal
Vol. 7, No. 1 (2015)
84
software Public Sector
Banks
(Pvt) -.02584 .08571 .951 -.2275 .1758
(For) -.84286* .14491 .000 -1.1838 -.5020
Foreign Sector
Banks
(Pvt) .81702* .15056 .000 .4628 1.1712
( Pub) .84286* .14491 .000 .5020 1.1838
Credit card
services
Private Sector
Banks
( Pub) .05724 .06236 .629 -.0894 .2039
(For) -.52847* .10954 .000 -.7862 -.2708
Public Sector
Banks
(Pvt) -.05724 .06236 .629 -.2039 .0894
(For) -.58571* .10543 .000 -.8337 -.3377
Foreign Sector
Banks
(Pvt) .52847* .10954 .000 .2708 .7862
( Pub) .58571* .10543 .000 .3377 .8337
Debit card
Services
Private Sector
Banks
( Pub) .40198* .08760 .000 .1959 .6081
(For) -.70517* .15389 .000 -1.0672 -.3431
Public Sector
Banks
(Pvt) -.40198* .08760 .000 -.6081 -.1959
(For) -1.10714* .14812 .000 -1.4556 -.7587
Foreign Sector
Banks
(Pvt) .70517* .15389 .000 .3431 1.0672
( Pub) 1.10714* .14812 .000 .7587 1.4556
Phone
Banking
Facility
Private Sector
Banks
( Pub) .55952* .08347 .000 .3632 .7559
(For) -.76190* .14663 .000 -1.1069 -.4170
Public Sector
Banks
(Pvt) -.55952* .08347 .000 -.7559 -.3632
(For) -1.32143* .14112 .000 -1.6534 -.9894
Foreign Sector
Banks
(Pvt) .76190* .14663 .000 .4170 1.1069
( Pub) 1.32143* .14112 .000 .9894 1.6534
Other IT
based Services
Private Sector
Banks
( Pub) .22619* .06382 .001 .0761 .3763
(For) -.38095* .11211 .002 -.6447 -.1172
Public Sector
Banks
(Pvt) -.22619* .06382 .001 -.3763 -.0761
(For) -.60714* .10790 .000 -.8610 -.3533
Foreign Sector
Banks
(Pvt) .38095* .11211 .002 .1172 .6447
( Pub) .60714* .10790 .000 .3533 .8610
One stop
banking
Private Sector
Banks
( Pub) -.40248* .08929 .000 -.6125 -.1924
(For) -.30963 .15685 .120 -.6786 .0594
Public Sector
Banks
(Pvt) .40248* .08929 .000 .1924 .6125
(For) .09286 .15096 .812 -.2623 .4480
Foreign Sector
Banks
(Pvt) .30963 .15685 .120 -.0594 .6786
( Pub) -.09286 .15096 .812 -.4480 .2623
Innovative
services
Private Sector
Banks
( Pub) .16895 .07807 .079 -.0147 .3526
(For) -1.22391* .13715 .000 -1.5466 -.9013
Public Sector
Banks
(Pvt) -.16895 .07807 .079 -.3526 .0147
(For) -1.39286* .13200 .000 -1.7034 -1.0823
Foreign Sector
Banks
(Pvt) 1.22391* .13715 .000 .9013 1.5466
( Pub) 1.39286* .13200 .000 1.0823 1.7034
*. The mean difference is significant at the 0.05 level.
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For Convenient operating hours, Tukey HSD results are significant for Public Sector Banks
and Foreign Sector Banks. Safety of funds transfer on net, there is a significant difference
between Foreign Sector Banks and public sector banks and between Foreign Sector Banks and
private sector banks, but not between public and private sector banks. In case of Reasonable
service charges and ATM services again the above results are replicated i.e. there is a
significant difference between Foreign Sector Banks and public sector banks and between
Foreign Sector Banks and private sector banks, but not between public and private sector
banks. For Phone Banking Facility and other IT based Services, there is a significant
difference between all the categories. The results are varied in case of one stop banking and
there is a significant difference between public and private sector banks but results are not
significant for foreign sector banks. Regarding Innovative services, there is a there is a
significant difference between Foreign Sector Banks and public sector banks and between
Foreign Sector Banks and private sector banks, but not between public and private sector
banks. Thus post-hoc tests throw more light on the differences of service quality on the basis
of Bank Categories.
Service Quality Factors
Factor analysis was performed to reduce service quality features to smaller number of factors
which could be used for regression analysis. Factor analysis results are depicted through table
VI. Four factors emerged from analysis, viz. Website interface, Security, Convenience and
Access. These four service quality factors explained 84.014 percent of variation.
Table VI: Forms of Service Quality in E-Banking
Factors Features Component Loadings
1 2 3 4
Website Interface
Eigen Value: 3.630. Innovative services .965
One stop banking .965
Internet banking Assistance .870
Other IT based services .769
% of Variation 30.249
Security
Eigen Value :2.338
Safety of funds transfer on net .764
Access to Security software .757
% of Variation 20.646
Access
Eigen Value: 2.460
Phone banking facility .942
Debit card services .936
ATM services .671
Credit card services .812
% of Variation 20.504
Convenience
Eigen Value :1.514
Low /reasonable service charges .763
Convenient operating hours . .635
% of Variation 12.615
Total Variation 84.014
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Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 5 iterations.
In website interface, Innovative services and One stop banking dominate with higher loadings.
In security, Safety of funds transfer on net and access to security software have almost similar
loadings and are equlaly important. In Access, Phone banking facility, and Debit card services
are higher on prioity. In Convenience, Low /reasonable service charges aregetting more
priority than convenient working hours. This mean that in developing countries there is still
emphasis on providing cost effective services. Overall results highlight that website interface
has the highest Eigen values and are relatively considered more important. Kaiser-Meyer-
Oklin Measure of sampling aqeuancy is 0.737 which is more than 0.5, so the model is also
acceptable.
Relationship Between Customer Loyalty and e-banking service quality Factors
Table VII: Relationship Between Customer Loyalty and e-banking service quality Factors
Model R R Square Adjusted R
Square
Std. Error of the
Estimate
Durbin-
Watson
1 .493a .243 .241 .84333
2 .668b .446 .443 .72225
3 .717c .514 .510 .67740
4 .722d .521 .516 .67350 2.038
a. Predictors: (Constant), Convenience
b. Predictors: (Constant), Convenience, Access
c. Predictors: (Constant), Convenience, Access, Security
d. Predictors: (Constant), Convenience, Access, Security, Website Interface
e. Dependent Variable: Customer Loyalty
ANOVAa
Model Sum of
Squares
Df Mean Square F Sig.
1
Regression 90.698 1 90.698 127.527 .000b
Residual 283.062 398 .711
Total 373.760 399
2
Regression 166.668 2 83.334 159.753 .000c
Residual 207.092 397 .522
Total 373.760 399
3
Regression 192.046 3 64.015 139.505 .000d
Residual 181.714 396 .459
Total 373.760 399
4
Regression 194.587 4 48.647 107.245 .000e
Residual 179.173 395 .454
Total 373.760 399
Coefficients
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Model Unstandardized
Coefficients
Standardized Coefficients t Sig.
B Std. Error Beta
Convenience .477 .034 .493 14.140 .000
Access .436 .034 .451 12.941 .000
Security .252 .034 .261 7.480 .000
Website Interface .080 .034 .082 2.367 .018
The last step of research was to find out the key determinants of E-banking loyalty. The
factors that emerged through factor analysis were taken as independent variables. The results
of regression are shown through table VII. All four factors, viz. Convenience, Access,
Security and Website Interface emerged as predictors of the model. With the inclusion of all
four factors, following a step wise regression, the value of adjusted R-Square increased from
0.241 to 0.516. This model explains 51.6 percent of variation. F-value is significant depicting
the overall acceptance of the model. The results have been reflected through figure 1.
Figure 1: Factors Influencing Customer Loyalty in e-banking.
On the basis of results, the study has classified the service quality factors influencing customer
loyalty as improvement areas or as enhancing factors. Improvement areas are shown through
light shaded squares, viz. comprising of security and website interface and enhancing factors
are depicted through dark shaded squares, namely Convenience and Access. Banks can choose
the areas they have to improve by focusing more on website interface and security. Similarly
customer loyalty can be enhanced by access and convenience.
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Conclusion
The first objective of the paper was to compare the key features of E-Banking Service quality
of private, public and foreign banks. The results reflected that customers perceive that foreign
sector banks provided better service quality features than private and public sector banks. For
convenience and Safety of funds transfer on net, public sector banks have higher ratings than
private sector banks. Private sector scored better than public in terms of many features, which
clearly reflects that there is a need to improve service quality delivery of public sector banks.
ANOVA results highlight that there is a significant difference in the service quality features of
Private, Public and Foreign banks. The first hypothesis that there is a significant difference in
the service quality features of Private, Public and Foreign banks has been accepted.
Factor analysis threw more light on the factors of e-banking service quality and results
highlighted that e-banking service quality features could be categorised into Convenience,
Access, Security, and Website Interface. The Eigen value and percentage of variation was
higher for advanced and progressive services as compared with conventional and allied
services including ATM, Debit card related services.
Regression analysis helped find important predictors of service quality. The results reflect that
these four services explain 56.4 percent of variation. All these services are positively
associated with consumer satisfaction. Thus H2: There is a positive relation between e-banking
service quality factors and Customer loyalty has been accepted.
Joseph et al. (1999) investigated the influence of internet on the delivery of banking services
and convenience was one of the important factors of service quality. Jun and Cai (2001) also
identified access as one of the dimensions of e-banking service quality. Jayawardhena (2004)
transforms the original SERVQUAL scale to five quality dimensions: access, website
interface, trust, attention and credibility. The present study focuses on e-banking service
quality factors and these are website interface, access, security and convenience. Convenience
is the reason for switching over to online banking. This study has come out with security as
fourth factor, as e-banking service quality has to rely on security software for enhancing trust.
The present study also focuses on the importance of these factors based upon customers’
perception. Convenience and access have higher B-value than security and website interface,
thus accordingly the banks can focus on those factors that is lacking and improve their website
interface and security software to improve performance. These two are improvement areas,
while focus on access and convenience can result in enhancing performance. Thus, to enhance
performance there is a need to focus on access and convenience.
Limitations of the Study
The generalization of this research may be affected because it is not possible to
conduct interviews of customers as questionnaires have generally closed ended
questions. This study covers NCR region, and not entire India due to limitation of
time.
Customers may vary from bank to bank and it is very difficult for us to target all the
customers.
This study includes e-banking users only for analysis. The customers who are ignorant
about e-banking services are outside the scope of this study.
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Suggestions for Future Research
E-banking in India is gaining momentum at a faster pace but it is a new phenomenon for
banks and for Indian banking customer also. It includes a lot of issues that can be considered
for various perspectives. This study highlights some of the service quality features that are
contributing towards customer loyalty in three categories of banks i.e., public, private and
foreign sector banks. There is still room for further area of research as how banks should
incorporate all these service features in gaining customer loyalty and customer retention.
Further research can be on making comparisons of different developed economies banks with
Indian banks like American, European banking websites & their e-banking practices with
Indian banking websites and its e-banking practices for studying service quality variables that
enhance the customer loyalty in banks. The ongoing technological innovations in Indian
banking sector on regular basis can always be a good area of further research.
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To cite this article:
Kaur, N., & Kiran, R. (2015). E-Banking Service Quality and Customer Loyalty:
Changing Dynamics of Public, Private and Foreign Bank Consumers in India. Global
Business and Management Research: An International Journal, 7(1), 74-92.